Isle execs least optimistic in decade

A third of executives polled in January said they expect Hawaii's economy to worsen

STORY SUMMARY »

With gross revenues declining, and customers dwindling, Hawaii businesses are feeling less optimistic about the economy this year.

The latest results of the Business Banking Council's economic indicator study, to be presented at a forum this morning, show business performance and optimism at all-time lows.

A third of the 401 businesses surveyed during two weeks in January believe the economy will get worse in the coming year -- the highest level of such sentiment since 1998, when the group began the surveys.

Another 27 percent reported a decline in gross revenue over the last year, the highest percentage since 2003.

The employment outlook remains steady, but companies said the higher costs of doing business and the price of gas were dragging on performance.

A third of retailers surveyed said they were either somewhat pessimistic or very pessimistic about the retail outlook over the next year.

Hawaii business optimism and performance are at all-time lows, according to the latest Economic Indicator Study by the Business Banking Council.

The results of the 21st annual study, sponsored by American Savings Bank, were released this morning .

Carol Pregill, president of the Retail Merchants of Hawaii, said the results were not surprising.

"We knew the slowdown was coming," said Pregill. "We had a number of really, really good years and I don't think any economy can continue at that pace."

A third of 401 businesses surveyed during a two-week period in January feels the economy will get worse in the coming year, a sentiment of economic tightening that is at its highest point since 1998, when the group began the surveys.

Another 27 percent reported a decline in gross revenue over the last year, the highest percentage since 2003.

The performance factor index, which measures changes in employment, gross revenues and profits before taxes, has taken a 10-point drop to 114, continuing a downward trend that began in 2007.

The optimism index, which reflects general economic outlook, also registered a 15-point drop to 104, the lowest it has been in a decade.

More than half of Hawaii businesses surveyed -- or 52 percent -- believe the economic outlook will remain the same for the coming year, but a third believe it will get worse. Only 17 percent feel optimistic about Hawaii's economic future.

Nearly half -- or 46 percent -- of businesses polled believe the economy has already flattened, although 21 percent continue to remain optimistic, believing it will improve over the next five years.

The top two factors cited for an economic downturn in Hawaii: 38 percent said the cost of doing business, and 17 percent said the price of gasoline.

More specifically, businesses said transportation and shipping costs (58 percent) and mandated health insurance (30 percent) were the top two impetuses behind the higher costs of doing business in Hawaii.

The employment outlook, on the other hand, still looks positive, with 23 percent saying they increased their staff, and 59 percent saying there was no change. A total of 18 percent reported declines in their numbers of employees.

Pregill said one of the challenges retailers continue to face is how to recruit and retain good workers.

Most of the businesses polled said their strategy for keeping quality employees was promoting from within or increasing employee incentives.

However, a third of the businesses said local high school graduates were ill-prepared and poorly educated for entry-level positions at their companies.

Among the 106 retail businesses surveyed, results shows that both the volume of customers and customer spending is declining.

More than a third -- or 31 percent -- reported a decrease in customer counts, a downward trend that began in 2006.

Nearly a quarter -- or 23 percent -- of retailers surveyed report-ed a decrease in average customer expenditures compared to just12 percent in 2007.

The level of optimism among retailers is also flagging, with only one in five -- or 21 percent -- feeling very optimistic about the industry in coming years.

Another 23 percent were somewhat pessimistic about the retail outlook for the next year compared to just 8 percent last year. Also, 7 percent were very pessimistic compared to just 3 percent in 2007.

Holiday sales declined for most of the retailers polled, with 40 percent reporting lower sales compared to a year ago.

However, Pregill believes January's sales numbers will come in stronger than December's, due to the popularity of gift cards, and that there will be some excitement generated by new retailers entering Hawaii.